Fred: That's excellent reasoning, however when the holders of these toxic, "death spiral" convertibles have conversion rights to common shares, it's not considered naked shorting.
e.Digital addressed this in the terms of the Series E convertibles. The financiers are authorized to short sell the number of shares to which they have conversion rights plus the 3 million warrant shares.
These days, companies know the horrible consequences of toxic convertible financing, but they engage in it out of sheer desperation as it is the only kind of financing they can get to keep management paid. The finaciers love it.
Unless the company goes BK before the shares are all converted, the financiers are guaranteed to make a killing on the financing deal. Shareholders and vendors are the ones who usually lose on the deal.
News 
Market Data 
Discover 
AI
